A four-year bachelor’s degree has long been the first rung to climbing America’s corporate ladder.
But the move to prioritize skills over a college education is sweeping through some of America’s largest companies, including Google, EY, Microsoft, and Apple. Strong proponents say the shift helps circumvent a needless barrier to workplace diversity.
“I really do believe an inclusive diverse workforce is better for your company, it’s good for the business,” Ginni Rometty, former IBM CEO, told Fortune Media CEO Alan Murray during a panel last month for Connect, Fortune’s executive education community. “That’s not just altruistic.”
Under Rometty’s leadership in 2016, tech giant IBM coined the term “new collar jobs” in reference to roles that require a specific set of skills rather than a four-year degree. It’s a personal commitment for Rometty, one that hits close to home for the 40-year IBM veteran.
When Rometty was 16, her father left the family, leaving her mother, who’d never worked outside the home, suddenly in the position to provide.
“She had four children and nothing past high school, and she had to get a job to…get us out of this downward spiral,” Rometty recalled to Murray. “What I saw in that was that my mother had aptitude; she wasn’t dumb, she just didn’t have access, and that forever stayed in my mind.”
When Rometty became CEO in 2012 following the Great Recession, the U.S. unemployment rate hovered around 8%. Despite the influx of applicants, she struggled to find employees who were trained in the particular cybersecurity area she was looking for.
“I realized I couldn’t hire them, so I had to start building them,” she said.
In 2011, IBM launched a corporate social responsibility effort called the Pathways in Technology Early College High School (P-TECH) in Brooklyn. It’s since expanded to 11 states in the U.S. and 28 countries.
Through P-TECH, Rometty visited “a very poor high school in a bad neighborhood” that received the company’s support, as well as a community college where IBM was offering help with a technology-based curriculum and internships.
“Voilà! These kids could do the work. I didn’t have [applicants with] college degrees, so I learned that propensity to learn is way more important than just having a degree,” Rometty said.
Realizing the students were fully capable of the tasks that IBM needed moved Rometty to return to the drawing board when it came to IBM’s own application process and whom it was reaching. She said that at the time, 95% of job openings at IBM required a four-year degree. As of January 2021, less than half do, and the company is continuously reevaluating its roles.
For the jobs that now no longer require degrees and instead rely on skills and willingness to learn, IBM had always hired Ph.D. holders from the very best Ivy League schools, Rometty told Murray. But data shows that the degree-less hires for the same jobs performed just as well. “They were more loyal, higher retention, and many went on to get college degrees,” she said.
Rometty has since become cochair of OneTen, a civic organization committed to hiring, promoting, and advancing 1 million Black individuals without four-year degrees within the next 10 years.
If college degrees no longer become compulsory for white-collar jobs, many other qualifications—skills that couldn’t be easily taught in a boot camp, apprenticeship program, or in the first month on the job—could die off, too, University of Virginia Darden School of Business professor Sean Martin told Fortune last year.
“The companies themselves miss out on people that research suggests…might be less entitled, more culturally savvy, more desirous of being there,” Martin said. Rather than pedigree, he added, hiring managers should look for motivation.
That’s certainly the case at IBM. Once the company widened its scope, Rometty said, the propensity to learn quickly became more of an important hiring factor than just a degree.
This story was originally featured on Fortune.com
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Today’s AI systems are quickly evolving to become humans’ new best friend. We now have AIs that can concoct award-winning whiskey, write poetry, and help doctors perform extremely precise surgical operations. But one thing they can’t do — which is, on the surface, far simpler than all those other things — is use common sense.
Common sense is different from intelligence in that it is usually something innate and natural to humans that helps them navigate daily life, and cannot really be taught. In 1906, philosopher G. K. Chesterton wrote that “common sense is a wild thing, savage, and beyond rules.”
Robots, of course, run on algorithms that are just that: rules.
So no, robots can’t use common sense — yet. But thanks to current efforts in the field, we can now measure an AI’s core psychological reasoning ability, bringing us one step closer.
Really it comes down to the fact that common sense will make AI better at helping us solve real-world issues. Many argue that AI-driven solutions designed for complex problems, like diagnosing Covid-19 treatments for example, often fail, as the system can’t readily adapt to a real-world situation where the problems are unpredictable, vague, and not defined by rules.
Common sense includes not only social abilities and reasoning but also a “naive sense of physics.”
Injecting common sense into AI could mean big things for humans; better customer service, where a robot can actually assist a disgruntled customer beyond sending them into an endless “Choose from the following options” loop. It can make autonomous cars react better to unexpected roadway incidences. It can even help the military draw life-or-death information from intelligence.
So why haven’t scientists been able to crack the common sense code thus far?
Called the “dark matter of AI”, common sense is both crucial to AI’s future development and, thus far, elusive. Equipping computers with common sense has actually been a goal of computer science since the field’s very start; in 1958, pioneering computer scientist John McCarthy published a paper titled “Programs with common sense” which looked at how logic could be used as a method of representing information in computer memory. But we’ve not moved much closer to making it a reality since.
Common sense includes not only social abilities and reasoning but also a “naive sense of physics” — this means that we know certain things about physics without having to work through physics equations, like why you shouldn’t put a bowling ball on a slanted surface. It also includes basic knowledge of abstract things like time and space, which lets us plan, estimate, and organize. “It’s knowledge that you ought to have,” says Michael Witbrock, AI researcher at the University of Auckland.
All this means that common sense is not one precise thing, and therefore cannot be easily defined by rules.
We’ve established that common sense requires a computer to infer things based on complex, real-world situations — something that comes easily to humans, and starts to form since infancy.
Computer scientists are making (slow) but steady progress toward building AI agents that can infer mental states, predict future actions, and work with humans. But in order to see how close we actually are, we first need a rigorous benchmark for evaluating an AI’s “common sense,” or its psychological reasoning ability.
Researchers from IBM, MIT, and Harvard have created just that: AGENT, which stands for Action-Goal-Efficiency-coNstraint-uTility. After testing and validation, this benchmark is shown to be able to evaluate the core psychological reasoning ability of an AI model. This means it can actually give a sense of social awareness and could interact with humans in real-world settings.
To demonstrate common sense, an AI model must have built-in representations of how humans plan.
So what is AGENT? AGENT is a large-scale dataset of 3D animations inspired by experiments that study cognitive development in kids. The animations depict someone interacting with different objects under different physical constraints. According to IBM:
“The videos comprise distinct trials, each of which includes one or more ‘familiarization’ videos of an agent’s typical behavior in a certain physical environment, paired with ‘test’ videos of the same agent’s behavior in a new environment, which are labeled as either ‘expected’ or ‘surprising,’ given the behavior of the agent in the corresponding familiarization videos.”
A model must then judge how surprising the agent’s behaviors in the ‘test’ videos are, based on the actions it learned in the ‘familiarization’ videos. Using the AGENT benchmark, that model is then validated against large-scale human-rating trials, where humans rated the ‘surprising’ ‘test’ videos as more surprising than the ‘expected’ test videos.
IBM’s trial shows that to demonstrate common sense, an AI model must have built-in representations of how humans plan. This means combining both a basic sense of physics and ‘cost-reward trade-offs’, which means an understanding of how humans take actions “based on utility, trading off the rewards of its goal against the costs of reaching it.”
While not yet perfect, the findings show AGENT is a promising diagnostic tool for developing and evaluating common sense in AI, something IBM is also working on. It also shows that we can utilize similar traditional developmental psychology methods to those used to teach human children how objects and ideas relate.
In the future, this could help significantly reduce the need for training in these models allowing businesses to save on computing energy, time, and money.
Robots don’t understand human consciousness yet — but with the development of benchmarking tools like AGENT, we’ll be able to measure how close we’re getting.
Investors this year increasingly turned away from dividend stocks in favor of the rising yields being offered on bonds. Given that investors can now earn a 4.3% return on a 2-year Treasury note, many prefer that guaranteed return to the risks of putting money into the stock market.
International Business Machines (IBM -1.44%) offers a dividend yield that exceeds that bond return. But with a bear market in progress, are investors better served to take a chance on the cloud stock or to take the 4.3% return at virtually zero risk?
IBM didn't participate in the bull market of the 2010s. The stock dropped as its tech businesses suffered a considerable growth slowdown. In an effort to change that, IBM pivoted into the cloud computing sector aggressively, in part via its $34 billion purchase of Red Hat in 2019. Grand View Research forecasts a compound annual growth rate of 16% through 2030 for the cloud industry. Growth like that could certainly help both IBM and its stock.
Also, IBM spun off its managed infrastructure business into a new public company, Kyndryl. This business was less of a fit with the parent company amid its pivot to the cloud. Separating it off should make it easier for IBM to grow its revenue.
Time will tell if these moves can help the stock price recover. Nonetheless, IBM currently pays its shareholders $1.65 per share every quarter, or $6.60 per share annually. At the current stock price, that adds up to a yield of 5.6% per year. Moreover, depending on your financial situation, the IRS may tax your dividends at a lower capital gains rate, which can offer an added advantage.
Additionally, IBM hiked its payout annually for 27 consecutive years, making it a Dividend Aristocrat. That status carries some importance as many income investors will be more inclined to buy and hold IBM stock because of this status. Also, since abandoning Dividend Aristocrat status tends to hurt a stock, management will probably prioritize maintaining it by continuing to raise those payouts.
Investors also can also reinvest their dividend payments into more IBM stock. However, such newly purchased shares will pay you the dividend yield at that time. The return will rise if the stock falls since investors can buy the exact cash return at a lower price. Conversely, cash yields will drop if the stock rises, but those investors still benefit since the stock has increased in value.
U.S. Treasury notes offer more stability than stocks such as IBM. Investors who purchase the 2-year Treasury note receive semiannual interest payments. At the current interest rate of 4.3%, investors will receive a 2.15% cash return on their invested amount in each of the subsequent three six-month periods. In the fourth period, when the note matures, investors receive the final 2.15% payment along with the return of their principal.
Investors should also be aware that bond values can fluctuate. If interest rates drop, the value of the bond will fall; the opposite will happen if rates rise. This affects investors if they decide to sell the bond early. Upon maturity, the note will return to its par (or nominal) value.
Additionally, bond interest payments are subject to federal income tax but exempt from state and local taxes. In some cases, this is higher than taxes on dividends. Still, bond issuers are obligated to make such payments. In contrast, IBM faces no legal obligation to continue its dividend.
Also, like with a stock, investors can reinvest their interest payments into more notes or other forms of Treasury bonds. However, those purchases will be subject to the prevailing interest rates at that time.
Investors who lack much risk tolerance should choose the Treasury note. Given its guaranteed return, they will not have to worry about volatility.
Nonetheless, for investors comfortable with buying stocks, IBM is a surprisingly strong buy. The cloud industry is in growth mode, which should propel IBM stock to a long-awaited turnaround. Moreover, IBM has repeatedly shown it wants to hold on to its Dividend Aristocrat status. This should give its income investors returns that are not only larger than the bonds offer, but also likely to increase in size.
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SUNNYVALE, Calif., Sept. 07, 2022 (GLOBE NEWSWIRE) -- eGain Corporation (NASDAQ: EGAN ), the leading knowledge automation platform provider for customer engagement, today announced the availability of a pre-built connector for IBM Watson Assistant. The connector leverages eGain's unique BYOB™ (Bring Your Own Bot) architecture, allowing business users to easily plug in the Watson Assistant into the eGain platform with no coding.
Per Gartner, less than 10% of customer service journeys are fulfilled using self-service, which is why it is critical to integrate chatbots with human-assisted service channels such as live chat. Beyond offering its own award-winning eGain Virtual Assistant, eGain's BYOB architecture facilitates seamless connection of eGain's knowledge automation platform with partner-provided conversational assistants.
The eGain Connector for Watson Assistant improves customer, agent, and business experiences at once. When customers escalate from Watson to human-assisted chat, their context is passed to the contact center agent so that they do not need to repeat information to the agent. Agents get to see interactions that customers have already had with Watson before they start their conversation with the customer. Business users can connect Watson into the eGain platform through a simple configuration in a matter of minutes.
Leading customers such as the department of health of a large state government are using this connector to leverage their extensive investment in Watson Assistant as they offer quality service, enhanced with eGain live chat support for escalated queries.
“Our BYOB architecture enables clients to compose differentiated and assured customer experiences across eGain capabilities and our ecosystem partner solutions,” said Ashu Roy, eGain CEO.“Our new connector enables IBM clients to get more value from their existing Watson Assistant investment.”
eGain listing on IBM's Business Partner Directory:
eGain Connector for Watson Assistant:
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Infused with AI, our knowledge-powered software automates digital-first experiences for enterprises and government agencies. Pre-connected with leading CRM & contact center systems, the eGain platform delivers quick value and easy innovation with virtual assistance, customer self-service, and modern agent desktop tools. Visit for more info.
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AT&T (T -0.86%) and IBM (IBM -1.44%) both underwent dramatic transformations over the past year. AT&T divested DirecTV, merged WarnerMedia with Discovery to create Warner Bros. Discovery (WBD -0.56%) , and sold many of its non-core assets to prioritize the growth of its core telecom business. IBM spun off its sluggish managed IT services unit as Kyndryl (KD -4.86%) and focused on expanding its higher-growth hybrid cloud and AI services instead.
Both companies billed those transformations as fresh beginnings for their aging, cluttered, and slow-growth businesses. However, IBM's stock has only risen 5% since it closed its spin-off of Kyndryl last November. AT&T's stock has declined about 15% since it spun off its WBD shares this April.
Those post-spinoff returns were disappointing, but AT&T and IBM both trade at dirt-cheap valuations and pay high dividends. Could those strengths make them compelling bear market buys as rising rates rattle the markets?
AT&T expects its total revenue to rise by the low-single digits this year. Within that total, its expects its wireless service revenue (which accounted for 51% of its top line last quarter) to increase 4%-5%.
That's significantly lower than Verizon's (VZ -0.06%) projected growth of 8.5%-9.5% in wireless service revenue this year. Verizon also ranks first in the domestic wireless market in terms of total subscribers, followed by T-Mobile and then AT&T. It's generally a red flag when the underdog is growing at a slower clip than the market leader. However, AT&T still expects its broadband revenue -- which includes its Fiber segment -- to grow more than 6% for the full year.
Those two core businesses look stable, but AT&T's total operating and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margins both declined year-over-year last quarter as it ramped up the expansion of its 5G networks and recognized a higher mix of revenue from its lower-margin business wireline division.
AT&T also reduced its full-year FCF (free cash flow) guidance from $16 billion to $14 billion, citing higher-than-expected capex, elevated investments to gain new subscribers, and delayed customer payments as the top challenges. However, that FCF can still easily cover its planned dividend payments of $8 billion this year. AT&T also maintained its full-year forecast for 0%-2% adjusted earnings per share (EPS) growth.
After spinning off Kyndryl last year, IBM claimed it could generate mid-single-digit annual sales growth and $35 billion in FCF over the following three years. To accomplish that, it predicted its high-single-digit growth in consulting revenue and its mid-single-digit growth in software revenue would offset the flat growth of its infrastructure unit.
Analysts expect IBM's revenue to rise nearly 5% this year. That stable growth should mainly driven by Red Hat, the open source software developer it acquired in 2019, and its other cloud-based services.
Instead of going head-to-head against Amazon, Microsoft, and Alphabet's Google in the crowded public cloud infrastructure market, IBM believes it can carve out a niche in "hybrid" cloud services, which link private on-site clouds to public cloud platforms. It also plans to help companies analyze all of that data with open source AI services.
That plan seems sound, but IBM's consulting and infrastructure gross margins still declined year-over-year in the first half of the year as it grappled with higher labor and component costs. It also slightly reduced its full-year FCF forecast from $10.0-$10.5 billion to $10 billion in the second quarter. That should still easily cover its estimated dividend payments of $6 billion this year. Analysts expect its adjusted EPS to increase 18% for the full year.
AT&T trades at just seven times forward earnings and pays a forward dividend yield of 6.7%. IBM trades at a higher forward price-to-earnings ratio of 13, while paying a lower forward yield of 5.2%.
AT&T's stock might seem cheaper, but it's also growing at a slower rate than IBM. AT&T's margins could also continue to decline as it faces tough direct competition from Verizon and T-Mobile in the crowded wireless market. IBM's focus on the smaller hybrid cloud niche could help it avoid comparable clashes with Amazon, Microsoft, and Google.
I'm not a big fan of either stock right now, but IBM clearly seems like a more well-balanced dividend play than AT&T. Meanwhile, AT&T won't impress the bulls again until it generates stronger FCF and earnings growth again.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun has positions in AT&T, Alphabet (A shares), Amazon, and Warner Bros. Discovery, Inc. The Motley Fool has positions in and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft. The Motley Fool recommends T-Mobile US, Verizon Communications, and Warner Bros. Discovery, Inc. The Motley Fool has a disclosure policy.
Quantum computing will bring unimagined innovations to the world when it finally arrives in full glory. Still, quantum remains in the research labs at companies like IBM, Google, and Microsoft. While companies and research institutions are investing billions of dollars to increase the capacity of quantum systems, a time will come in the following years, or decades, when researchers will reach "quantum supremacy." But these large quantum marvels could also jeopardize the security of critical information systems. Researchers, including IBM are working to develop new security algorithms that will be resilient to these attacks.
While quantum can solve computing challenges far beyond what is possible today, its ability to find the factors of large prime numbers makes it the ideal cybersecurity safe cracker once quantum computing systems mature in their scale, quality, and speed. Every computer system and every bit of "secure" data could become vulnerable to attack from quantum-equipped nefarious actors. The World Economic Forum "estimate(s) that over 20 billion digital devices will need to be either upgraded or replaced in the next 10-20 years to use the new forms of quantum-resistant encrypted communication. We recommend that organizations start planning for this now.”
What constitutes "adequate size" might give us some false comfort: a 2019 study suggested that a computer with 20 million qubits would take eight hours to break modern encryption. Today's quantum computers are on the order of only 100 qubits. But while that implies that the threat is in the distant future, one must consider that a bad actor doesn't need to wait for the massive quantum system to materialize. The "Steal now, crack later" approach leads to a latent future security threat. Consequently, organizations should deploy quantum-safe security as soon as possible to minimize future risk.
Consequently, the National Institute of Standards and Technology (NIST), a bureau of the U.S. Department of Commerce, has been conducting an ongoing search for quantum-safe security algorithms that are both secure and efficient. After all, we need our laptops, cars, and mobile phones to also be able to resist attacks from quantum-equipped bad actors. After four rounds of submissions, NIST selected four algorithms from a slate of 82 candidates. IBM Research had submitted 3 of the four chosen algorithms. All submissions have been subjected to research by industry scrutiny by government agencies, academic scientists, and mathematicians. This process is now reaching its conclusion; the NIST is expected to publish standards based on these 4 algorithms sometime in 2024.
The NIST contest covers the two aspects of security that could be vulnerable to quantum computing: public key encapsulation (used for public-key encryption and key establishment) and digital signatures (used for identity authentication and non-repudiation). For the former, NIST selected the CRYSTALS-Kyber algorithm. NIST selected three algorithms for signatures: CRYSTALS-Dilithium, FALCON, and SPHINCS+, with CRYSTALS-Dilithium as the primary algorithm in the signature category.
On September 29, GSMA announced the formation of the GSMA Post-Quantum Telco Network Taskforce, of which IBM and Vodafone are initial members, to help define policy, regulation and operator business processes to enhance protections of telecommunications in a future of advanced quantum computing. Since virtually all organizations and sectors conduct commerce on the internet, and the 800 providers whose pipes that carry all the internet traffic, the Telco industry is a good place to start. We expect other sectors to follow suit, perhaps starting with banking, government, and health care.
Given the magnitude of the potential risks, and the predominance of IBM Z systems in security-critical applications, IBM has included future-proof digital signature support in its latest z16 mainframe using CRYSTALS-Kyber and CRYSTALS -Dilithium algorithms selected by NIST. z16 implements this algorithm across multiple layers of firmware to help protect business-critical infrastructure and data from future quantum attacks. IBM has said it is also working to bring these new methods to the broader market.
In addition, IBM has developed a multi-step process to assist clients toward rapidly making institutions quantum safe. The company works with clients to identify where they are vulnerable to quantum-based cryptography attacks, assess cryptographic maturity and dependencies, and identify near-term achievable cryptographic goals and projects. The risks clients may face vary substantially based on the type of applications and data an organization handles and the state of its current cryptography.
Quantum computing's potential threat to global information security may seem to be a distant and abstract risk. However, the inevitable advances of quantum technology and the "Steal now, crack later" approach bad actors are undertaking to make quantum-safe a genuine and pressing matter for vendors and IT organizations. IBM wasted no time bringing that technology to market in the IBM z16. IBM Research has contributed three of the four algorithms the NIST quantum-safe contest has selected to be the most viable, secure, and efficient of the 70 techniques evaluated.
Beyond the NIST-approved algorithms, IBM Is working to provide “crypto agility”, helping organizations not only replace the soon-to-fail existing algorithms but also transform their security practices to remain resilient as new threats emerge in the post-quantum world. Creating crypto observability, enabling ongoing monitoring and actions on crypto-related security items, will help keep the world safer from bad actors with virtually unlimited computing capacity at their disposal.
More information can be found at here.
Disclosures: This article expresses the opinions of the authors, and is not to be taken as advice to purchase from nor invest in the companies mentioned. Cambrian AI Research is fortunate to have many, if not most, semiconductor firms as our clients, including Blaize, Cerebras, D-Matrix, Esperanto, FuriosaAI, Graphcore, GML, IBM, Intel, Mythic, NVIDIA, Qualcomm Technologies, Si-Five, SiMa.ai, Synopsys, and Tenstorrent. We have no investment positions in any of the companies mentioned in this article and do not plan to initiate any in the near future. For more information, please visit our website at https://cambrian-AI.com.
IBM continues to spend millions to buy hybrid cloud companies, as the company makes its sixth acquisition in 2022 with Dialexa.
IBM continues to spend millions on buying hybrid cloud companies with the unveiling of its acquisition of engineering consulting specialist Dialexa to boost its cloud charge.
Since IBM CEO Arvind Krishna took the reins in April 2020, IBM has acquired more than 25 companies, including many hybrid cloud businesses.
In February alone, IBM acquired cloud consultant services standout Sentaca, as well as Microsoft Azure consultancy all-star Neudesic—with the two purchases squarely aimed at boosting IBM’s hybrid and multi-cloud services capabilities.
[Related: UK To Probe Amazon, Google, Microsoft’s Cloud Dominance]
Looking at the Armonk, N.Y.-based company’s purchase of Dialexa, IBM will gain 300 skilled product managers, designers, full-stack engineers and data scientists. Dialexa will become part of IBM’s Consulting business unit, which spearheads the company’s digital product engineering services in the Americas.
“Dialexa’s product engineering expertise, combined with IBM’s hybrid cloud and business transformation offerings, will help our clients turn concepts into differentiated product portfolios that accelerate growth,” said John Granger, senior vice president of IBM Consulting, in a statement.
Dialexa marks IBM’s sixth purchase in 2022 with the goal of boosting its hybrid cloud and artificial intelligence abilities.
Along with buying Dialexa, Sentaca and Neudesic, IBM has also acquired Randori, an attack surface management cybersecurity specialist that helps protect hybrid cloud environments.
Earlier this year, IBM’s CEO said hybrid cloud and artificial intelligence are top of mind for his company in terms of investment and the future.
“We are integrating technology and expertise—from IBM, our partners and even our competitors—to meet the urgent needs of our clients, who see hybrid cloud and AI as crucial sources of competitive advantage,” Krishna said in March. “And we are ready to be the catalyst of progress for our clients as they pursue the digital transformation of the world’s mission-critical businesses.”
In 2021, IBM’s hybrid cloud revenue jumped 19 percent compared with 2020, comprising 35 percent of its total revenue.
Based in Dallas and Chicago, Dialexa delivers a suite of digital product engineering services to help customers create transformative products to drive business outcomes.
Dialexa’s 300-strong engineers and skilled IT experts advise and create custom digital products for customers, which include Deere & Company, Pizza Hut U.S. and Toyota Motor North America. Financial terms of the Dialexa deal were not disclosed.
IBM said Dialexa provides deep experience delivering end-to-end digital product engineering services consisting of strategy, design, build, launch and optimization services across cloud platforms including Amazon Web Services and Microsoft Azure.
“Digital product engineering represents the tip of the spear for competitive advantage,” said Dialexa CEO Scott Harper in a statement. “IBM and Dialexa’s shared vision for delivering industry-defining digital products could be a game-changer.”
RESEARCH TRIANGLE PARK – In a move to enhance its hybrid cloud and AI capabilities, IBM will buy the digital product engineering consulting services firm Dialexa in a deal that will close later this year.
IBM announced the deal in a statement, which also notes that the purchase of the firm will “deepen IBM’s product engineering expertise and provide end-to-end digital transformation services for clients.”
When the deal closes, Dialexa will become the sixth company bought by IBM in 2022.
But Big Blue has been on a buying frenzy since April 2020, when Arvind Krishna became the company’s CEO. According to the company, IBM has acquired more than 25 other firms, with 13 to bolster IBM Consulting.
The latest acquisition of Dialexa points toward how IBM may grow its consulting services presence.
“In this digital era, clients are looking for the right mix of high-quality products to build new revenue streams and Excellerate topline growth,” said John Granger, senior vice president, IBM Consulting, in a statement. “Dialexa’s product engineering expertise, combined with IBM’s hybrid cloud and business transformation offerings, will help our clients turn concepts into differentiated product portfolios that accelerate growth.”
The company’s 300 employees are based in Dallas and in Chicago, and will join IBM Consulting, according to the statement. Among the firm’s clients is Toyota Motor North America, which will invest $2.5 billion in North Carolina to build the company’s first U.S. electric battery manufacturing plant in Randolph County.
IBM (IBM) closed at $127.73 in the latest trading session, marking a +0.36% move from the prior day. This move lagged the S&P 500's daily gain of 0.69%. At the same time, the Dow added 0.64%, and the tech-heavy Nasdaq lost 0.2%.
Coming into today, shares of the technology and consulting company had lost 8.02% in the past month. In that same time, the Computer and Technology sector lost 14.62%, while the S&P 500 lost 9.94%.
Investors will be hoping for strength from IBM as it approaches its next earnings release. On that day, IBM is projected to report earnings of $1.88 per share, which would represent a year-over-year decline of 25.4%. Meanwhile, our latest consensus estimate is calling for revenue of $13.75 billion, down 21.96% from the prior-year quarter.
Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $9.39 per share and revenue of $59.9 billion. These totals would mark changes of +18.41% and -15.38%, respectively, from last year.
Investors might also notice recent changes to analyst estimates for IBM. These revisions typically reflect the latest short-term business trends, which can change frequently. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.
Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.
The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Over the past month, the Zacks Consensus EPS estimate has moved 0.88% lower. IBM is currently a Zacks Rank #3 (Hold).
Digging into valuation, IBM currently has a Forward P/E ratio of 13.56. This represents a no noticeable deviation compared to its industry's average Forward P/E of 13.56.
Meanwhile, IBM's PEG ratio is currently 1.94. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. Computer - Integrated Systems stocks are, on average, holding a PEG ratio of 1.77 based on yesterday's closing prices.
The Computer - Integrated Systems industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 162, putting it in the bottom 36% of all 250+ industries.
The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.
To follow IBM in the coming trading sessions, be sure to utilize Zacks.com.
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